Question

Blank Corporation acquired 100 percent of Faith Corporation’s common stock on December 31, 20X2, for $190,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition:

Item	Blank				Faith
	Corporation				Corporation
Assets
Cash		$	67,000			$	21,000
Accounts Receivable			82,000				39,000
Inventory			111,000				64,000
Buildings and Equipment (net)			230,000				166,000
Investment in Faith Corporation Stock			190,000
Total Assets		$	680,000			$	290,000
Liabilities and Stockholders’ Equity
Accounts Payable		$	90,000			$	20,000
Notes Payable			134,000				80,000
Common Stock			83,000				49,000
Retained Earnings			373,000				141,000
Total Liabilities and Stockholders’ Equity		$	680,000			$	290,000

At the date of the business combination, the book values of Faith’s net assets and liabilities approximated fair value. Assume Faith Corporation’s accumulated depreciation on buildings and equipment on the acquisition date was $13,000.

  

Required:

a.	Give the consolidation entry or entries needed to prepare a consolidated balance sheet immediately following the business combination. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

b.

Prepare a consolidated balance sheet worksheet. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)

Answer 1

(a) Consolidation Entries :-

Investment in Faith- Dr 190000

Cash –Cr 190000

(Recorded the Initial Investment in Faith)

Accumulated Depreciation – Dr   13000

Buildings & Equipmnet   -   Cr   13000

(b) Consolidation Balance Sheet Worksheet :-

	Blank	Faith	Dr	Cr	Consolidated
Balance Sheet
Cash	67000	21000			88000
A/c Receivable	82000	39000			121000
Inventory	111000	64000			175000
Buildings & Equipment (net)	230000	166000	13000	13000	396000
Investment in Faith	190000	--------	--------	190000	0
Total Assets	680000	290000	13000	203000	780000
A/c Payable	90000	20000			110000
Bonds Payable	134000	80000			214000
Common Stock	83000	49000	49000		83000
Retained Earnings	373000	141000	141000		373000
Total Liability & Equity	680000	290000	190000		780000